Nikkei slumps to 4-month low as inflation scare hits expensive shares

© Reuters.

TOKYO, May 13 (Reuters) - Japanese shares sank on Thursday,
with the Nikkei average hitting a four-month low, as SoftBank
Group 9984.T and highly valued stocks were pummelled by U.S.
inflation scare.
The Nikkei index .N225 dropped 1.84% to 27,628.73, hitting
its lowest level since early January, while the broader Topix
.TOPX shed 0.61% to 1,866.57, touching a three-month low.
"Inflation worries are hitting high-tech stocks while rising
domestic coronavirus infections are raising concerns about
political stability. And, companies' guidance is pretty soft,"
said a strategist at a Japanese brokerage.
"But I do expect the market to bottom out soon. You can't
keep selling forever when earnings are still improving."
A shocking rise in U.S. inflation published on Wednesday
fanned worries U.S. interest rates may need to rise sooner than
expected.
That bludgeoned Wall Street overnight, especially tech
shares whose high valuations have been based on the assumption
of low interest rates, and hit Japanese equivalents as well.
SoftBank Group 9984.T dropped 7.2% as concern over its
frothy portfolio valuations eclipsed the fact that it has
announced a record profit for a Japanese firm. Other richly valued shares, mainly from the tech and
healthcare sectors, fell sharply, with medical equipment maker
Terumo 4543.T down 4.3%, chip-making machine maker Tokyo
Electron 8035.T losing 4.4% and lens maker Hoya 7741.T
dropping 3.2%.
Also hurting market sentiment, Japan is struggling to
contain the COVID-19 pandemic, forcing dozens of towns to
abandon plans to accept overseas athletes competing in the
Olympics from July due to concerns about inadequate resources.
Earning results also continued to weigh on the market, with
softer-than-expected guidance often enough to trigger big
selling, dwarfing improving profits.
Game company Nexon 3659.T lost 15.3%, while electronics
maker NEC 6701.T dropped 11.7%. JGC Corp 1963.T fell 10.6%.
Meanwhile, about a third of shares on the main board managed
to gain, led mainly by value shares, such as steelmakers
.ISTEL.T and banks .IBNKS.T . The Topix Value index .TOPXV
was almost flat.
Retailer Seven&i Holdings 3382.T jumped 6.8% to a two-year
high after activist investor ValueAct Capital amassed a $1.53
billion stake in the firm. Sumitomo Mitsui Trust Holdings 8309.T gained after the
Nikkei business daily reported the banking group planned to sell
down all of its cross-holding shares.